Compass Inc. Halves Its IPO Size Ahead of Going Public

Compass Inc. may have overestimated its worth as the company halved its initial offering ahead of going public.

The SoftBank-backed real estate startup announced Wednesday it would sell 25 million shares at a price between $18 and $19 in an updated IPO filing with the SEC. That’s a dip from the company’s original plans to offer 36 million shares for $23 to $26 per share.

Compass shares are due to begin trading on the New York Stock Exchange on Thurs., April 1, under the symbol “COMP.”

Compass’ IPO joins a growing list of real estate companies that have gone public, including Zillow, Realogy, eXp World Holdings, RE/MAX, Redfin and, most recently, Fathom Realty.

Compass stands to raise $475 million in the offering at the new price, dropping from the $936 million it was aiming for earlier. As a result, Compass’ projected valuation also dipped from $10 billion to roughly $7 billion.

While that will put Compass ahead of several real estate companies on the New York Stock Exchange, the real estate start-up will still be leaps and bounds behind Zillow which brought in a $31.1 billion market cap on Wednesday. Comparatively, Berkshire Hathaway and CoStar’s market caps are currently $587.67 billion and $32.39 billion, respectively, while eXp World Holdings’ cap is listed at $6.37 billion and RE/MAX and Realogy’s are listed at $731.72 million and $1.77 billion, respectively.

Goldman Sachs, Morgan Stanley, Deutsche Bank, UBS Investment Bank and Barclays are still underwriters for the filing, but the group will see a dip in the number of shares they will be able to buy, according to the filing.

They will have the option to purchase up to 3.75 million additional shares from Compass at the initial public offering price, down from the 5.4 million shares previously named in Compass’s last filing update.

The family of Compass CEO and Founder Robert Reffkin indicated an interest in purchasing up to $18.5 million in shares in the filing.

Reffkin’s holdings account for 47% of Compass’s outstanding capital stock’s voting power—-a 1% uptick from previous filings. That could increase to 70% if he “vests and settles in certain equity awards, including specific performance-based equity awards, outstanding at the time of the completion of this offering,” according to the filing.

According to a Bloomberg article, SoftBank-related funds own about 35% of the Class A shares of Compass, while Reffkin, who has 2.4% of the Class A shares, currently owns all of the Class C shares.

Compass has touted offerings of advanced technology, marketing tools, CRM software, and more, to recruit thousands of agents since launching in 2012.

Compass struggled in the early days of the pandemic, which resulted in the firm laying off 15% of its employees. The company reported net losses of $388.0 million and $270.2 million in 2019 and 2020, respectively. Despite this, the New York-based brokerage’s revenue rose to $3.72 billion in 2020 from $2.39 billion the year prior—roughly a 56% YoY increase.

This is a developing story. Stay tuned to RISMedia for more updates.

Jordan Grice is RISMedia’s associate online editor. Email him your real estate news ideas to jgrice@rismedia.com.